18 February 2010

Obsessions are dangerous, because in any conflict, be it political, economic, or military, they create vulnerabilities that can be exploited by one's adversaries -- not to mention one's purported allies. That is because obsessions shape the Orientation of one's Observation - Orientation - Decision - Action (OODA) loop in a way that induces one to see and act on what one "wants" to see rather than what "is." When this happens, one's decision cycle looks inward and becomes disconnected from its environment, and as a result, the actions decided on will not have the desired outcome. The mismatch between desires and reality will then feed back into subsequent decision cycle, and if the obsession is not corrected inside the decision-maker's orientation , the mismatches will amplify themselves in subsequent actions. Left unaddressed only one outcome is possible: what the American strategist Colonel John Boyd, the inventor of the OODA Loop, used to call "incestuous amplification," or an increasingly self-referencing decision making spiral, that by "talking to itself, succumbs to an inevitable evolution into chaos.

America's amplifying obsessions with Israel are creating just this kind of evolution, and there is no better example than in our increasingly dangerous self-referencing policy towards Iran, which itself is now turning into an obsession.

The downward spiral becomes apparent when one tries to examine the results of Secretary of State Hillary Clinton's recent visit to the Middle East through the eyes of those she was trying to win over. Her aim was to shore up our Arab "allies" in a unified anti-Iran policy. But as Rami Khouri, a highly-regarded observer of politics in the Middle East (bio), explains in this commentary in Lebanon's Daily Star, Clinton's pathetically transparent efforts devolved into yet another version of our old self-referencing efforts to shore up a pro- Israeli, neo-colonialist, foreign policy that is doomed to fail again.

14 February 2010

I asked a friend -- a seasoned Republican political operative who must remain anonymous -- to comment on New York Times columnist Frank Rich's recent analysis of the Tea Party phenomenon, Republican faux populism, and its chief spokesperson du jour, Sara Palin (see Rich's Palin's Cunning Sleight of Hand also introduced below). My friend, call him Republican Operative X, has been very critical of the witty albeit accurate criticisms Rich has used to poke fun at both these subjects as well as their Republican adherents. Operative X has warned me repeatedly that Rich was being too light hearted about what was a very dangerous movement toward a demagogic strand of populist authoritarianism that could move this country toward the darkness of an "inverted totalitarian" dictatorship. But this op-ed by Rich is different. Attached are my friend's reactions to Mr. Rich's latest handiwork and some political prognostications.

A Political Analysis of Inverted Totalitarianism

by Republican Operative X

February 14, 2010

I suppose Rich gets it now.

1. As I said about 6 months ago, the GOP strategy is to delegitimize Obama and make it impossible to govern -- then sweep into power amid the chaos they they themselves partly created. A "chaos" strategy is the only thing they've got (rather than rational alternative policies), but it's an effective strategy given the intellectual qualities of the American people, effective GOP control of large segments of the media, and the Democrats' propensity to play into their hands.

2. Psychological testing has shown that for people with deeply held but false beliefs, empirical demonstration that their beliefs are false does not cause them to renounce those beliefs; on the contrary, they dig in and believe them more firmly, and invent conspiratorial rationalizations as to why the empirically demonstrated facts are wrong. That's a good profile of the Palinistas.

3. I am already making odds that the GOP will sweep into power, at least in one house of Congress in 2010, and the whole shooting match in 2012. It probably won't be Palin, but the party will be in her image. The Palin GOP will make the Bush GOP look like the Mensa Society.

4. I go back and forth on how radically authoritarian the Bush presidency was: was it sui generis in American history, or did it just incrementally intensify already-evident aspects of cold war and post-cold war America? Conceivably, under the shock of 9/11, a Gore presidency might have adopted similar unilateral and authoritarian measures. And Obama has shown little propensity to roll back the main thrust of Bush's policies. Some people called the Bush administration fascist, but Sheldon Wollin's term "inverted totalitarianism" might be more applicable: intensifying authoritarianism under a façade of normal life. Much of the propaganda function of authoritarian government was done not directly but through corporate intermediaries: advertising, corporate-owned cable "news," etc. Rather than mobilizing the population a la classic fascism, inverted totalitarianism seeks to make them distracted and politically apathetic: e.g., Bush telling Americans to go out and shop after 9/11.

5. While Bush represented the classically corporate model, the Palin Party will blend in a (faux) populism and a leather-lunged lower middle class white male resentment. A GOP in power in 2018 is going to have more of the trappings of what we think of as traditionally fascist: political witch trials; xenophobia and racism (for reasons having to do with free trade ideology and Eastern elite upbringing, Bush was not xenophobic or racist); political mobilization via the tea parties (or whatever their successors are); and God knows what else.

6. It will finish us off as a great power, for whatever damage the populist side of Palin's GOP does to civil liberties, the social fabric of the country, and foreign relations, the corporate side of the party will be back at their old tricks: they will thoroughly and irrevocably wreck the government's finances, destroy social security, and drain even more of the nation's wealth into the hands of an even more entrenched oligarchy.

"Mark to Market" is (or was?) an accounting standard that required financial institutions to value their assets at their current market value. Thus a stock portfolio would be valued at an amount determined by the stock market, if the stock holder sold all his assets in that market. Last Spring, when the government was contemplating its plan to rescue the big banks, it settled on the idea of using taxpayer money to purchase or guarantee the so-called toxic assets of the large "investment" banks and their insurers (e.g., collateralized debt obligations and credit default swaps). The banks lobbied furiously against the mark to market rule, because the toxic assets could not be sold in a market that was frozen, and under the rule, they would be valued a fraction (somewhere between 0% and 60%) of their original purchase prices. Under mark to market, the banks would take a bath or even become insolvent. So, they concocted a new concept of "fair value," which came close to reimbursing them at cost, thus implying the capitalist market was inherently unfair. The Federal Government ended up guaranteeing the debt at taxpayer expense, thus securing an American economic system that guarantees private profits at the expense of public losses for the privileged entities on Wall Street.

But don't blame the banks for this kind of system. They are only doing what is natural when one is working with the best government money can buy. In fact, the American political economy has many ways of guaranteeing private profits with public subsidies of what should be private losses.

For example, the latest scam in the Military - Industrial - Congressional Complex (MICC) is the so-called "Buy to Budget" formula for the hugely expensive and deeply troubled F-35 Joint Strike Fighter.

This formula was just gleefully endorsed in an email recently sent to the F-35's Stakeholders. The author, Charles T. Burbage, is the executive vice president of Lockheed Martin Aeronautics Company and general manager of the F-35 Joint Strike Fighter (JSF) Program Integration. Burbage is responsible for ensuring that all of the F-35's requirements are fulfilled for both the program’s U.S. and its international customers, as well as its industrial partners around the world. And the email makes clear Burbage is licking his chops at the MICC's latest coup.

It is pretty easy to understand why Burbage is so gleeful. Defense contractors operate in a "cost-plus" economy, where profits are a negotiated percentage of costs. If costs rise, profits rise. The Pentagon just approved another higher cost estimate for the F-35 and a reduced production quantity. That is clearly good, but Burbage is confident the future looks even rosier. The reasons for his confidence in Lockheed's rosy scenario becomes clear when "Buy to Budget" is viewed in this context of the MICC's political economy.

"Buy to Budget" increases the incentive to grow costs even faster and thereby increase profits even more over the long term. The rosy scenario results when costs continue to grow, and smaller numbers of F-35s will be purchased each future year, all financed within a given budget level. The lower F-35 production rates will exacerbate the aging crisis of the F-16s, A-10s, F-18s, and AV-8s that the F-35 is supposed to replace. But the average age of these airplanes is already far greater that they were designed for, so the political/bureaucratic pressure to increase the production rate of the F-35 will be enormous. Moreover, Burbage knows the Pentagon does not want any alternatives to the F-35. This rising political/bureaucratic pressure caused by the aging inventories will therefore lead to loud calls for higher F-35 budgets, and larger budgets will provide a larger space in which to "Buy to Budget" by jacking up costs further. Thus, the deadly cycle of cost growth, decreasing production rates, aging inventories, and higher profitability will reinforce itself again, in what is the political-economic equivalent of a perpetual motion machine.

At a program acquisition cost already exceeding $300 billion, and a total life cycle cost approaching one trillion dollars (which no doubt will include lots of follow-on maintenance contracts for Lockheed), the F-35 is solidly on track to be the all time record breaker in high cost programs, in which continual production cutbacks will finance a never ending honey pot for Lockheed. Moreover, the Pentagon just signaled its increased commitment to the importance of the program by elevating its government program manager (Burbage's uniformed equivalent) to a two star to a three star general officer, in this case a vice admiral in the Navy -- which means more high level meetings in bigger offices, more cocktail parties, and more of the pomp and circumstance that are the perks of working in the MICC, not to mention even greater high-powered efforts in the Pentagon to save face by continuing business as usual. That the F-35's foreign partners like Great Britain and the Netherlands will help to foot the ever increasing bill is merely icing on the cake.

In the context of MICCs long-term survival, Burbage's gleeful endorsement of "Buy to Budget" reaches back to the end of the Cold War confirms the farsighted wisdom displayed William Anders, former CEO of General Dynamics (note: GD at that time owned the Fort Worth factory where Burbage now works and the F-35 is produced). "Buy to Budget" is validation of the MICC business strategy that Anders spelled out in 1991. Anders decided that General Dynamics (and by extension the Fort Worth factory, which he subsequently sold to Lockheed) was not going to diversify business operations into the non-defense commercial manufacturing sector, even though the Cold War had just ended. Anders said his decision was to increase his concentration in defense activities (a view widely shared and resulted in increased oligopolization of the industry, in an orgy of Pac Man gobbling up of defense companies by other defense companies during the early 1990s. He said this decision to increase concentration was "not surprising," because 80% of defense acquisitions in the non-defense sector failed. He then explained succinctly why these acquisitions are always so unsuccessful: "Defense industry management teams generally have little commercial experience and market savvy," and "Most have been cost-plus and mil spec trained." He concluded by saying, "In short, most don't bring a competitive advantage to non-defense business," and "Frankly, sword makers don't make good and affordable plowshares."[1]

Of course, what Anders did not say is that sword makers also do not make good affordable swords. But who cares when you live in a posh, post-cold-war marketplace like Burbage's, where ever rising costs and profits are fueled by a user friendly Pentagon policy of "Buy to Budgets."

Franklin “Chuck” Spinney is a former military analyst for the Pentagon. He currently lives on a sailboat in the Mediterranean and can be reached at chuck_spinney@mac.com

Monday, February 1, 2010, was a day that should live in budgetary infamy. The Defense Department released its Quadrennial Defense Review (QDR) and its accompanying Fiscal Year 2011 budget request, which is the first year of the Fiscal Year 2011-2015 five year plan (2011-2015 FYDP). These documents are available on the internet and can be downloaded in PDF format here: QDR and the FY 2011 budget.

Even by the dismal intellectual standards of Pentagon bureaucracy, the QDR and the FY 2011 budget, taken together, establish a new standard of analytical vacuity, psychological denial, and just plane meaningless drivel. I will keep this short by using just one important case to prove my allegation. Judge for yourself if it is necessary and sufficient to make the point.

First, I must bore you with a little background: The Pentagon has been producing FYDPs since 1962. But these FYDPs have been repeatedly criticized for producing defense budgets that were disconnected from the national military strategy -- and because the dollar allocations made in any budget determine what any government's policy really is, the critique was logically equivalent to saying there was no strategy. The congressional legislation in the mid 1990s that established the QDR was only the most recent attempt to deal with this long standing criticism. The aim of that legislation was to require the Pentagon to lay out an intellectual framework for matching its military strategy and ambitions to the resource constraints shaping those ambitions, especially budgetary constraints, but also constraints relating to people, the limitations imposed by available technologies, etc.

The new FY 2011 budget and its accompanying FYDP, therefore, are supposed to attach budgetary and programmatic meat to the strategic skeleton that is the QDR, both of which were completed at the same time and made public on 1 February -- itself a somewhat illogical sequence, given that one is supposed to precede the other. In theory, these documents should permit an analysis of the strengths and weaknesses implicit in the matchup between resources and strategy. Therefore, these documents should enable the Secretary of Defense to send the President and the Congress a comprehensive set of priorities, opportunity costs, and risks associated with his strategic plan. This information would then become the grist for a rational national debate by linking strategic considerations to the inevitable compromises made in the sausage making factory that is Congress. Moreover, as this is President Obama's first budget, and because it represents $700+ billion that Mr. Obama just put off limits in the coming national debate over whether or how to shrink the federal deficit, it was crucially important for the Pentagon to get the QDR and the accompanying FY 2011-2015 FYDP right in a logically consistent and transparent manner.

If we apply this standard to the Pentagon's recently completed handiwork, only one conclusion is possible: the Pentagon flunked the test by being intellectually absent without leave.

One example is sufficient to prove this point. For the past 20 years or so, mainstream and defense related press outlets have inundated the American public with horror stories about the Pentagon's aging force structure and with stories about the Pentagon's unauditable budget shambles -- the two are intertwined. And over the last 10 years or so the public has been inundated by stories describing how that force structure is being being worn out by the high operating tempos of our never ending wars and interventions, yet another dimension of the same problem. In fact, I first started documenting this aging trend in the early 1980s in a series of analytical studies, some classified, but most unclassified, and it has gotten worse and more intractable each year.

There is simply no question that the weapons in our force structure inventories have been getting older on average at an alarming rate. The fundamental reason for the aging trend is that the unit costs of buying and operating new weapons grow faster than defense budgets grow, even when budgets grow at unprecedented rates, as they have since the mid-1990s, and consequently, as weapons grow older over time, they become more expensive to operate, which exacerbates the growth in operating costs even further, and the rising costs eventually forces decision makers to retire the oldest weapons without replacement, thereby shrinking the size of the force structure. It is beyond dispute that today the Pentagon is fielding the smallest and, on average, the oldest force structure since the end of WWII, yet it is paying more for that force structure, even after adjusting for the effects of inflation, than at any time since the end of WWII.

Central to this pathological death spiral is the unquestionable fact that the Pentagon's financial management system can not keep track of its actual expenditures or how the predicted expenditures in its FYDP will unfold over over time. The chaos in the accounting system provides the intellectual "grease" to lubricate the engine driving narrow bureaucratic agendas that are causing the force structure meltdown. Senior decision makers can not possibly understand the trade offs they are really making when they put together a budget, assuming they wanted to, which is also in doubt. The accounting problem has been identified in tens, if not hundreds, of reports produced by the General Accounting Office (the auditing arm of Congress) and the Defense Department's own Inspector General. I described how the budget shambles impacted the strategic decision making problem in my last testimony to Congress in June 2002.

The problem of unilateral disarmament at ever higher cost (i.e., the interaction of weapons cost growth greater than budget growth, aging and shrinking forces, and corrupt accounting system that makes it impossible to sort our corrective strategies) is well established, and thanks to the largess of Mad King George, should now be beyond dispute.

So, I have a test for you, dear reader: Download the QDR and the FY2011 budget from the links in the first paragraph. The are formated in searchable PDF file format. Do word and phrase searches on words like aging, age, "weapons aging," accounting, audit, bookkeeping, or anything else you can think of that might related to the problems described above, and determine for yourself the extent to which these problems are addressed. (eg., a search in the budget of "audit" will take you to page 7-34, among others, where you will find that DoD set a goal of reaching 100% auditability for its assets and liabilities in the year 2017, but the last column shows that the indicator of progress made toward that goal in FY 2010 was deleted at the request of the Comptroller, who happens to be the chief financial officer of DoD!)

Alternatively, you could make the same kind of determination by reading the entire text of each, but before you do so, I recommend you buy a couple of boxes of No Doz, so you can keep awake. Either way, you will end up with the same self evident conclusion.

Some farm defenders might say, we must go forward with this protected monstrosity, because we are at war.

That is a false choice -- President Obama could freeze the core budget at this year's level, just like he is doing for the rest of the government. He could tell the Pentagon to go back to the drawing board and come up with something more reasonable. If he chooses to do this, he should task the Pentagon with a massive crash program to clean up the bookkeeping shambles as job 1, rather than waiting until 2017. At the same time, Obama could then ask Congress to pay for his wars on a "pay as you go" basis, which Congress and the Pentagon have been doing for years, in any case, via supplemental appropriations.

Readers interested in a more details on one way we might go about cleaning out the Pentagon's Augean Stables can read my statement to Congress from the aforementioned link.

Franklin “Chuck” Spinney is a former military analyst for the Pentagon. He currently lives on a sailboat in the Mediterranean and can be reached at chuck_spinney@mac.com